Advice from Warren Buffett

Advice from Warren Buffett

Every so often true genius emerges from the ranks of mortals. The Oracle of Omaha, is one of the select few. Warren Buffett, the richest man in the world, recently enlightened us, in regards to investing. Mr. Buffett known as the Oracle of Omaha, provided us a chance to pause, and rethink our current strategies. This is nothing new from Mr. Buffett. In fact, he has been saying the same thing for decades, however, few listen. Many think they can beat the system and yield 50% gains on the next IPO. However, examples of this are few and far between. Here is some advice from Warren Buffett.

Investors should, “Buy a cross section of America then never listen to people like me or read the papers or do anything subsequently.” In other words, buy a few index funds that invest in American companies and forget about it. Warren’s message is to keep things simple and that you don’t need to be a day trader to yield incredible gains. Moving money in and out of stocks quickly is not a good investment strategy.  Keep in mind, capital gains tax on short-term investments can be crushing. Furthermore, you are exposing yourself to risks if it is a bad news day. “If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.” Warren Buffett.

The Oracle of Omaha further states, “They think just because they can trade they should trade.” Why expose yourself to the daily stress of jumping in and out of the market? Keeping CNN on all day, watching your favorite investment news, may be a waste of time according to Buffett. Use time more efficiently and research ways to generate more income, rather than listen to others tell you that the next crash is just around the corner. Whenever stocks are down the latest interviews are predicting a recession is on the way. Then, when stocks go back up, others are calling for a soaring market with no end in sight. It seems to me like the news is more focused on ratings, than data.

Look at Vanguards VYM, it has a 15.54% yield over a ten year period. This fund is well diversified, it holds JPMorgan Chase & Co, Cisco Systems Inc, Johnson & Johnson, and Pfizer Inc and provides quarterly dividends. It is a good example of Mr. Buffett’s cross section of American.

Be on the lookout for index funds with low fees and diversification. Fees eat profits and Vanguard index funds are well known for their low fees. A 15% yield on a fund over a 10 year period is excellent. You don’t need to worry about being the king of the investment world, leave that to Warren Buffett. You just need enough to pay for your kids education and plan for retirement. Most will not listen to this advice and will continue to place risky bets. “Those who ignore history are doomed to repeat it.” – George Santayana. The way I see it; there is only one Warren Buffett, who has beat the system and to ignore his advice seems more foolish than day trading.

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